Sponsored: Banking on the cloud
As all four major Australian banks publicise their aspirations to move to a simplified, more agile and cost-efficient operation, hybrid cloud capabilities are at the heart of enabling this growth and transformation goal, argues Deloitte’s Yousaf Mir
As banking organisations create new business models, cloud will enable a simpler, efficient and more customer aligned bank.
Cloud investment is growing
The Economist magazine predicts that cloud’s importance across all industries in developed and developing countries will grow by more than 400 per cent in the next five years, with banking leading the surge. A soon to be published assessment of the public cloud’s contribution to the Australian economy by Deloitte Access Economics also identifies cloud’s significant economic contribution over the past five years.
Retail banks in Australia continue to embrace cloud technologies, with forecasts of continued growth expecting a shift of between 5 per cent and 10 per cent of their resources to cloud-based services by 2020. This increases last year’s and this year’s associated spend by 8.5 per cent. Gartner predicts Australian organisations will spend $5.6 billion on cloud this year, a 20 per cent increase on 2018.
The Cloud Industry Forum reports that cloud penetration stands at 88 per cent in the UK and is similarly high in Australia. Australia’s predicted growth rate is 20.3 per cent vs a global rate of 17.3 per cent.
What are the benefits of cloud to banks?
The main benefits of the cloud identified by major banks so far has been related to cost and development times. Although important, the exponential benefits of cloud run much deeper than this.
As well as helping to appropriately balance their books, cloud supports major banks spend more time on the customer experience, delivering faster ‘time-to-insight’ from data, and a decrease in development time for both new applications and updates.
Cloud is also a paradigm shift in developing and deploying technology solutions to serve a firm’s purpose. Cloud technology is driving ‘creative destruction’ or in other words, facilitating a complete change in the way businesses operate.
Three standout benefits for banks are:
• Standardising processes and information across a large number of business units
• Agility from decreased development time
• Redirection of CAPEX to a better return on investment.
However, in general effective cloud use tends to be the exception rather than the rule in Australia, especially during initial cloud adoption. In a survey of 204 Australian C-level executives, 97% said: ‘They would have made different strategic decisions during their first cloud migration.’
What are the lessons?
Barriers to effective cloud utilisation include under-development of cloud management strategies, over-spending on cloud budgets, and underestimation of business risks.
The major issue in Australia is the skills gap that arises as companies attempt to adopt cloud without dedicated resources and specialist knowledge. This gap, which is primarily due to inadequate planning, underpins cloud adoption weakness. In a labour market where nearly half the companies hiring full-time staff for cloud initiatives take between three to six months to hire, this gap can dramatically extend timelines and increase costs associated with cloud adoption.
As most banks are early in a growing cloud journey, understanding and optimising their cloud strategies and transition is critical
Understanding both the challenges and benefits of cloud adoption
Cloud adoption challenges fall under four main themes:
As most banks are early in a growing cloud journey, understanding and optimising their cloud strategies and transition is critical. Any inconsistent application of a new technology can fracture the internal IT ecosystem, put service delivery at risk, and even endanger sensitive data.
However, the overall benefits give a business the opportunity to offer better, faster and more personalised value to customers to sustain the business and grow it. Financial services organisations need to strategically prepare and respond to this significant business change and more than ever ensure that their business units and technology strategies and functions work collaboratively as one for the benefit of the whole enterprise and the customers it serves.
Yousaf Mir is a Partner in the Deloitte Technology Strategy and Innovation Group. He has worked with Financial Services clients across the UK, Europe and APAC with a particular focus on helping banking clients optimise their cost base and integrate emerging technologies. It’s all about putting cloud computing to work, and addressing the challenges that exist with implementing resilience, security and regulation.
Clive Minchin Director Technology Strategy & Architecture brings both his technology strategy and design experience of complex architectures to help organisations navigate the transformational challenges of moving from legacy platforms to leading edge technology.